Business confidence in West Midlands at record high – Grant Thornton/ICAEW

MORE evidence that the economic recovery is taking hold has arrived in the shape of the latest research from accountancy and advisory firm Grant Thornton and the Institute of Chartered Accountants in England and Wales (ICAEW).

It shows business confidence in the region is at a record high.

The research backs up the findings of a survey carried out by fellow Birmingham accountancy firm BDO last month which reported that business optimism reached its highest level for 22 years in January.

The latest ICAEW/Grant Thornton UK Business Confidence Monitor (BCM) found that businesses in the West Midlands are feeling more confident than ever before as the economic improvement gains momentum. Confidence in the region has been on a general upward trend since Q4 2012 and now stands at +42.2, well above the UK national average of +37.2.
 
Businesses in the West Midlands report relatively stable annual growth in key performance indicators this quarter. Over the past year, gross profits grew by 1.4%, turnover rose by 3.0% and sales volumes by 3.5%. However, in line with the trend of increasing business confidence, growth in these indicators is expected to markedly pick up over the coming 12 months.

Over that period, gross profits are forecast to increase by 5.2%, sales volumes by 6.2% and turnover by 6.5%.

Domestic sales have been growing steadily over the past year, at 2.7%, and are expected to accelerate further. Over the next 12 months, businesses predict domestic sales will increase by 6%.

Exports from the region are forecast to rise by 5.1% next year, up from 2.6% over the previous year.

Tom Madden, ICAEW regional director for the Midlands, said: “As we have seen with the recent GDP figures and this quarter’s BCM, the recovery is accelerating.

“We need to continue to push to grow our exports, against a backdrop of a widening trade deficit, at the same time as ensuring that the momentum the UK economy has is maintained across all parts of the country.

“If the forecast figures for key performance indicators in the region are achieved, it would suggest that the economic recovery is firmly in place in the West Midlands.”

Dave Munton, regional managing partner for Grant Thornton, said: “This quarter’s BCM paints a positive picture for the West Midlands, with companies looking more proactively at unlocking their growth potential.

“A key element of this, as highlighted by leading CEOs at our Agents of Growth Summit, relates to the retention and growth of talent. Companies in the West Midlands are planning to increase headcount by 2.1% over the next 12 months – significantly higher than the 1.3% growth over the past year, with average pay expected to increase at 2.3% for the next year compared to 1.7% over the last 12 months.

“Such expectations result in challenges and an environment of increasing employment costs, together with the broader risks associated with growth, will need careful management.”